Dragons’ Den Series 14, Episode 16
Pitch success, defeat and... seaweed - The finale episode served up some important business lessons for emerging start-ups. Read on to find out what these were...
In the series finale of Dragons’ Den we saw a variety of businesses pitch for investment – including men’s fragrances, high-end food delivery, seaweed snacks and interactive fitness – but only one pitch would be successful…
Find out which pitch made the investors part with their cash and read up on the business lessons you can take-away:
Concept: Men’s grooming products
Investment sought: £75,000 for 15%
Investment received: None
Former corporate lawyer Rob Hallmark was first into the Den this week pitching for investment in his male grooming brand Gruhme.
Hallmark started the business three years ago to bring “fresh, masculine and modern” but traditional male fragrances to market. The brand was looking to launch a range of products such as shavers and brushes to compliment its aftershaves.
So far existing as a niche brand, Gruhme turned over £30,000 last year and was ready to enter the corporate space with a £75,000 investment.
Peter Jones didn’t like the smell: “It feels like somebody’s grabbed me and I’ve gone through a few lemon trees and there’s some lavender on the ground”.
Deborah Meaden said the dapper entrepreneur represented his brand very well, but pointed out that the fragrance market has seen “a lot of new entrants recently”: “What was the gap you saw and why did you attack that?”
Hallmark: “A lot of the male brands coming out were a bit too t-shirts, tattoos and beards, which wasn’t my sort of marketplace, and I wanted something fresh and masculine… the strong name – it’s not trying to be too clever”.
However, Jones also wasn’t sure about the name and its pronunciation, while Touker Suleyman argued that he’d “missed a big trick”: “Why don’t you pick an old English name? Could have been Smith & Jones […] package that as an old English product that would have given it heritage”.
But Hallmark had a strong response: “I think it’s rare for a brand today to be quite punchy, to go for that corporate heart stone […] my belief with Gruhme is that it’s a new generation product. Our USP is this start-up culture, the kind of Apple, IBM tussle”.
A steadfast Suleyman wasn’t going to have his mind changed: “Go back to being a corporate lawyer because that’s not going to make you money. I’m not going to invest – I’m out”.
Nick Jenkins: “You are looking at cost of sales of a few hundred thousand, the rest is gross margin, but of course what comes into that is this enormous marketing budget”.
Hallmark said he was going for a guerrilla approach: “We’ve approached hotel chains who’ve really adopted the brand because it’s different, it’s new”. Jenkins thought it could make him millions if he could crack it.
Meaden admitted she wasn’t a fan of putting things on her skin and would have been more keen to invest if it was organic, becoming the second Dragon to drop out of the deal. Jones said if he wanted to enter the space he would bring out a Peter Jones aftershave and followed suit.
Willingham said he’d picked one of the most difficult markets: “Unless you’ve got superhero powers, entering that market would really scare me […] I’m afraid I’m out”.
Jenkins liked the brand because it wasn’t “trying to pretend to be anyone else”, but said the probability of him pulling it off was very unpredictable. He became the final Dragon to exit the deal.
Start-up business lesson: Although he was a self-assured pitcher with a promising brand, the difficulty in entering the mainstream fragrance market made the Dragons turn their noses up. Ambition is attractive but Hallmark might have been better pitching with more achievable plans and taking on the big players later. Marketing will be key to making Gruhme’s lofty ambitions a reality – find out how to successfully market your business here.
Concept: On-demand high-end food delivery
Investment sought: £100,000 for 10%
Investment received: None
Next to face the Dragons was Peter Georgiou with his on-demand, high-end food delivery service Supper, seeking £100,000 to help with marketing, key hires and further product development.
So far, Supper had partnered with 25 restaurants, two of which are Michelin-starred, hitting sales of £165,000.
Central Londoner Suleyman liked the name and the brand and asked if he had exclusivity with the restaurants. Georgiou said he had exclusivity with 80% of the restaurants on the platform.
Jones: “I’m quite surprised that a Michelin star restaurant would allow their food out of the restaurant, be placed in your hands and delivered 40 minutes later somewhere else”. Georgiou claimed that his delivery times were actually around 15 minutes, with an average of 100 orders a week at around £70 each. Supper takes commission from a service and delivery charge, making £9 from each delivery.
Georgiou had invested £300,000 of his own money to date, most of which had gone towards technology – money he’d made during his stint as a solo city trader.
Willingham: “I’m going to completely disagree, I don’t think you have got something […] the problem is, if this works it will fail. There is a reason top end restaurants cap their seats and that is so they can control what is going through that kitchen […] they operate to their capacity”. She declined to invest.
After hearing that Georgiou was trying to tap into the corporate market, Jones had other concerns: “If anyone of my MDs was ordering a Michelin star meal, I’d throw them out of the nearest window”. He also exited the deal on the grounds that it was too niche and had a ridiculous valuation.
Suleyman thought it would only be a very small section of the market that would want Michelin star food delivered, as most would want the experience of going to the restaurant. For that reason, he declined to invest.
Meaden asked how much further investment he’d need and after skirting round the question, Georgiou revealed another £350,000 at least would be needed to keep the business going. Meaden: “I promise you you’re going to need a lot more than £350,000 and you’re going to dilute me to the point where I’m just not going to be interested. […] You’ve structured it wrong, which is a shame. I’m out”.
Having no expertise or experience in the culinary world, Jenkins wasn’t convinced that he could make it work and became the final Dragon to decline to invest.
Start-up business lesson: Georgiou’s business seemed more like a passion project than a definite money-spinner and he lacked an understanding of the sector and the size of the potential market. Make sure you know the industry you’re trying to enter and the customers you are trying to reach inside out to give investors confidence in you and your business. Georgiou could have done with some tips from David McQueen on how to nail a funding pitch first time.
Ashley and Kate Jones
Concept: Seaweed snacks
Investment sought: £70,000 for 20% equity
Investment received: None
Husband and wife team Ashley and Kate Jones were next into the Den pitching for investment in an unusual Japanese snack food – seaweed.
Named after Ashely’s grandfather – who would collect edible marine produce from the South Wales coastline to sell – Selwyn’s produces “light and healthy” flavoured seaweed-based snacks from “Grade A nori seaweed”.
Meaden enjoyed the salt and vinegar and agreed that they were satisfying but was disappointed by the consistency. The entrepreneurs said that the form they had chosen was the most popular round the world.
Willingham said she was a “convert of seaweed” after spending time in Japan, but wasn’t sure it would “translate over to a Western palate”. While they agreed it was “relatively new to the UK market”, they pair said they thought it could definitely be adopted by Western consumers.
Jenkins: “I think as it is at the moment, you’re pioneering in a very risky market, you’re producing what is per gram and extraordinarily expensive product, I would be more attracted to this business if it was starting with the raw seaweed and you were producing it locally”. He became the first Dragon to exit the deal.
The Joneses revealed that they’d already spent £270,000 of their own money bringing their idea to life, most of which had gone on to renting a factory.
Meaden: “If I was you I would do something completely different – I wouldn’t do what everyone else is doing, I’d turn it into what I would call a snack […] I’m afraid I won’t be investing, I’m out”.
For Willingham, the product was too niche and she also dropped out of the deal. Suleyman was concerned that their factory only produced for three days every month, advising them to find out what else the factory could make and keep the brand totally separate. He also declined to invest.
Jones did like the product and commended the entrepreneurs for their passion, but couldn’t get his head round their decision to spend so much of their money on rent. He didn’t make an offer.
Start-up business lesson: Selwyn’s snacks was too niche for the Dragons, who didn’t think it would find a big western audience, while their decision to only produce three days a month from a rented factory showed a lack of business sense. Jenkins suggestion to produce locally and Suleyman’s that they should look into other options for their factory could make the business a more attractive proposition. That said, the Dragons did like the taste of their seaweed snacks. Find out how to start a food production company here.
Company: Rugged Interactive
Concept: Interactive fitness game machine
Investment sought: £100,000 for 10% equity
Investment received: £100,000 for 30% shared between Jones and Meaden
Cornish engineer and inventor Simon Heap was the final entrepreneur in the Den this week. He was looking for a £100,000 investment into his company Rugged Interactive – an interactive fitness brand that uses technology to “make it easier for anyone to get fit and remain healthy”.
As Peter Jones asked about his sales of £250,000 over the last 12 months Heap asked if he could bring up his advocate and business associate Martin Worth. Worth said Rugged was expecting to post gross profit of 50%. Heap justified their £1m valuation by saying that the company had been experiencing an “incredible run rate”, generating £50,000 a month. Meaden asked what the number at the bottom of his balance sheet was but Heap had to admit that he didn’t “know it exactly”.
Suleyman asked how big their forward order book was in money terms. Worth claimed they were looking at £800,000 for next year of committed orders. “You haven’t got £800,000 of committed orders have you?” asked Jones. “No”, replied Heap, revealing that their pipeline was actually around £500,000.
With each fitness unit costing around £8,000, Meaden wanted to understand why having one in her gym would drive revenue. “Gyms are boring”, said Heap, “they have a high churn rate […] two thirds of people buy a gym membership and never go back. It makes it more interesting and more fun”.
Willingham compared his product to things she’d tried on Brighton Pier: “What is your USP?”.
“Our USP is our ability to create and innovate. One thing we don’t talk about is that it’s internet connected, it goes up to the cloud”, argued Heap, “For professional sport and healthcare and schools it’s a real benefit because it means they can track longitudinal performance. This isn’t just a British business, this is a British business selling worldwide”.
Jenkins revealed he wasn’t able to invest as he was at business school with Heap’s business partner Harry Stevens.
“Martin we didn’t start off on the right foot. I think in the excitement you got a bit carried away with it”, said Jones, “but I’ve got to say, I really like it. And I don’t think it’s a game that will come repetitive and boring because it’s got that whole cardiovascular fitness piece […] I love it and I love it so much that I want to make you an offer”. He offered half the money but for 15% of the company. Suleyman quickly put his hand up to “offer the other half”.
Meaden said they’d “got her early on” and also offered half the money for 15%. Heap almost “blew it” when he suggested that Jones explain his credentials. Meaden was shocked that he hadn’t done his research, before he revealed that he knew exactly what Jones, a tech tycoon, could offer.
Heap said 30% was “a little high” and asked if they could drop down to 15%. Jones said he would be willing to give back 5% when he’d earned his money back, which Meaden agreed to – provided this was within two years. Suleyman, now flying solo, offered the full £100,000 for 20%.
Heap and Worth went to the back to discuss the offers before deciding to accept Meaden and Jones.
Start-up business lesson: Heap’s pitch was tense at times when he wasn’t able to offer accurate figures and or financial projections, but his belief in his product shone through. A clear passion for your business will go a long way to convincing investors that you are investable. Alternative fitness was one of our business ideas for 2017.